Texas Federal Northern District Judge Denies Nationwide Preliminary Injunction to Block the DOL’s New Overtime Rule

Quick Hits

• A federal court in the Northern District of Texas denied a preliminary injunction to block the DOL’s new rule raising the salary thresholds for the FLSA’s white-collar exemptions.
• The ruling turned on the fact that the employee at issue may not have been exempt under the prior standard.
• A separate Texas federal court has issued an injunction blocking the enforcement of the rule limited to the state of Texas as an employer.
• There appear to be no other pending requests for a nationwide injunction.

Departing from the recent ruling by another Texas federal court, a court in the Texas Northern District denied a motion for a nationwide preliminary injunction to block the 2024 DOL rule, which increased the minimum salary required to qualify for the Fair Labor Standards Act’s (FLSA) overtime executive, administrative, or professional (EAP) employee exemption.

Flint Avenue LLC, a Lubbock, Texas-based software development and marketing firm, had challenged the rule, alleging it would eliminate the EAP exemption for its employees, one of whom would be affected by the July 1, 2024, increase, and that the DOL rule impermissibly focuses the exemption on employees’ weekly pay rather than the type of work performed.

However, the court found it significant that the company’s junior employee, whom it alleged would be disqualified from the EAP exemption, did not even meet the minimum salary threshold to qualify for the exemption under the DOL’s existing 2019 rule. Thus, the court found Flint Avenue had not shown that the rule would cause it irreparable harm and was not entitled to a preliminary injunction.

The 2024 DOL rule raised the minimum weekly salary to qualify for the EAP exemption from $684 per week to $844 per week or the equivalent salary of $43,888 per year, effective July 1, 2024. The rule will further increase that threshold to $1,128 per week, the equivalent of a $58,656 annual salary on January 1, 2025, and increase it every three years based on up-to-date wage data.

According to the Texas Northern District court decision, it was undisputed that the junior employee at issue did not meet the 2019 minimum salary threshold when the company’s lawsuit was filed. The employee was later offered a new contract to raise the salary to qualify for the EAP exemption that was “back dated” to before the filing of the company’s lawsuit.

While the court noted that the January 1, 2025, increase will potentially impact four other company employees, it said there is sufficient time to address the merits of the company’s claims before that date.

The ruling comes days after a judge in the U.S. District Court for the Eastern District of Texas blocked the enforcement of the 2024 DOL rule against the state of Texas as an employer in a separate case challenging the rule. The court, in that case, found that the state is likely to succeed in proving that the rule exceeds the DOL’s authority under the Administrative Procedure Act (APA) because the EAP exemption would focus on employees’ salaries, not their job duties.

Notably, the court in that case cited the Supreme Court of the United States’ June 28, 2024, decision in Loper Bright Enterprises v. Raimondo, which overruled the Chevron deference framework in which courts would defer to federal agencies’ reasonable interpretations of the federal laws they enforce.

The Eastern District of Texas has also consolidated a third challenge to the 2024 DOL rule brought by more than a dozen business groups led by the Plano Chamber of Commerce, which had not sought a preliminary injunction.

Next Steps

The ruling in the Flint Avenue case was based on the specific facts of that case and further consideration on the merits of the company’s arguments that the 2024 DOL rule is unlawful will continue. The rule will also continue to be questioned in the consolidated case in the Eastern District of Texas. In the meantime, there appear to be no other pending requests for a nationwide injunction to block the July 1 threshold increases, meaning nearly a million employees other than those who work for the state of Texas may no longer be overtime exempt.

Ogletree Deakins’ Wage and Hour Practice Group will continue to monitor developments and will provide updates on the Wage and Hour blog as additional information becomes available.

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